Canoel’s strategic revitalisation through increased gas production in Italy and an innovative expansion of oil production in Argentina is taking form as the battered junior resource sector shows signs of life. While Canoel’s actions over the past quarter are modest in comparison with management’s multi-year strategy, they offer comfort that Canoel is on track for substantially increased cash flow in the coming years. Whilst we believe Canoel’s plan is sound, it remains contingent on management successfully raising substantial sums for its acquisitions and upgrades, and accordingly carries considerable risk.

With resource markets now appearing to have bottomed, Canoel is revitalising itself. It has successfully put its new Italian gas assets into production and now proposes a major, C$7m programme for its producing Argentinean oil fields. Contingent on available cash resources, Canoel will also undertake a series of expansion projects in Italy, worth C$7m, that offer paybacks between 1.5-3 years. Further projects are in the offering in Libya and Africa. Canoel has recently completed a 1:10 share consolidation in preparation for raising funds.

Canoel is acting as a consolidator of low-cost producing petroleum assets too small for the majors but offering immediate cash-flow and good upside with small capital expenditures. In its first move, Canoel acquired two producing oil fields in Argentina. The company subsequently acquired two natural gas fields in Italy capable of achieving quick production, which have become the new focus.

Vital Metals has an advanced tungsten project at Watershed in northeastern Australia that offers significant and as yet unrealised current value. The company also holds an early-stage gold exploration project in Burkina Faso that provides substantial upside potential to investors in the longer term. The company intends to proceed aggressively with development of its tungsten project whilst stepping up exploration at its gold property.

Solid Resources has a promising early-stage tantalum-tin-rare metals project in an accessible region of northwestern Spain. The company has completed a 2011 drill programme, drilling two mineralised zones, and expects to complete a NI 43-101-compliant resource estimate in October, and achieve quick production thereafter.